so apparently, according to my broker, there was some new Dept of labor mandate that went into effect last year. And with my simple IRA, all the trades have to go through the broker. There is no way for me to move funds around, or to set buy allocations from inside my account online. the best I can do is get the broker to do the trades for me. (very lame) they call this "guided solutions" I call it job security. I'm still not exactly sure how to transfer the funds over to vanguard without penalty. (which wont really matter until 2019 anyway)
I did tell him that I wanted to be into a total market fund and to send me a list of what they have and Ill let him know where to put the new money.
FWIW, I would send them an email or a letter where you (1) lay out what they explained to you ("It is my understanding based on our conversation that I cannot invest in VTSMX/VTSAX through you, and that instead I must allow you to invest my contributions in your managed funds, and that this is due to a new DOL regulation"); (2) ask them to confirm that your understanding is correct; (3) ask them to send you a copy of the regulation and any internal guidance that this conclusion is based on; and (4) ask them to send you the full list of funds/ETFs that they will allow you to invest your own contributions and/or the match in. Investment companies are well known for making oral representations that they will not back up in writing. So if this is just their version of obfuscating the truth to persuade you to stay with them, asking them to commit that to writing may clarify what the actual requirements are.
I had a funky situation once where the company required me to put all of my own investments and their match into the company stock. I pushed back on that, and they later confirmed that in fact, the requirement was only that their
match went into the company stock, and I could invest my money in any number of other options. So don't just rely on the first thing they tell you, especially when it doesn't make sense.
Otherwise, +1 to Classic Liberal. I would not be
at all inclined to withdraw any tax-favored money for a downpayment, because then you lose that tax-deferred growth forever; sure, you can contribute in the future up to the limits, but you can never put back in the money you took out, or make up for any past years in which you did not invest up to the limit. So if it were me, I'd stick the entire IRA into the lowest-cost broad market index fund they will allow you to invest in, do any diversification in other accounts where you can choose among better/lower-cost funds, and then save for the downpayment in a regular money market account. Even if that means putting off buying for another few months or a year, you will very likely come out ahead in the end given the benefits of untaxed compounded growth over 30-40+ years.
But if you are insistent on using this money as part of your downpayment,
do not put it in a broad-market index fund -- given your intent to buy within a year or so, it needs to be in a money market/stable value fund, or at most an ultra-short-term bond fund.
Finally, don't judge a fund by its short-term performance; that will usually just tell you what market segment is popular. Judge it by the costs. If you avoid actively-managed funds entirely, and focus on low-cost index funds or ETFs, you should be just fine.